The number of firms falling into insolvency in England and Wales surged to the highest level for 14 years in the past quarter, according to Government figures.

Insolvency Service data revealed that there were 6,342 company insolvencies over the three months to June 2023.

It was a 13% increase against the same period last year and represented the highest figure since the second quarter of 2009 amid the toll of the financial crisis.

Firms in England and Wales have come under heavy pressure from higher energy bills, increased labour costs and a sharp increase in borrowing costs after hikes to interest rates.

The Insolvency Service said the total was predominantly creditors’ voluntary liquidations – where owners choose to dissolve their businesses – which comprised 5,240 insolvencies.

It said there were also 637 compulsory liquidations, 409 administration and 56 company voluntary arrangements (CVAs).

The new data means that more than 12,000 firms have entered insolvency so far this year.

From the start of the coronavirus pandemic until mid-2021, numbers of company insolvencies had been low when compared with pre-pandemic levels after firms were aided by financial support packages.

David Kelly, head of insolvency at PwC, said the full effect of interest rises on firms could still be yet to come.

“High inflation and the increasing cost base for firms is resulting in the erosion of both liquidity and shareholder value, thus reducing confidence in the ability to hit future forecasts,” he said.

“Coupled with rising interest rates, it is making for a very challenging environment for business.

“Like homeowners coming off fixed mortgage rates, many businesses have yet to refinance their debt, meaning the full impact of higher interest rates may yet to be felt.”

It came as separate data from the public body also revealed that the number of people across England and Wales registering for “breathing space” from their debts jumped by 26% in the second quarter of this year.